High and low or close to close prices? Evidence from the multifractal volatility

Zhichao Liu, Feng Ma and Yujia Long

Physica A: Statistical Mechanics and its Applications, 2015, vol. 427, issue C, 50-61

Abstract: In this study, we examine the daily returns and daily range returns dependent on close–close and the high–low prices when forecasting multifractal volatility in the Chinese stock market. In in-sample forecasting we find that both the daily returns and range returns have a significant impact on the future multifractal volatility, existing the well-established phenomenon of “leverage effects” of the positive and negative returns. Moreover, using the MF-DFA method, we find that both the two series present the persistence and exhibit the multifractal features. Furthermore, our MCS test results show that the ARFIMA-lnMFV-R and ARFIMA-lnMFV-LR models provide relatively superior volatility forecasts in comparison to all other models. Finally, we find that the daily returns calculated by close to close prices have a greater power than the daily range return calculated by high and low prices in forecasting.

Keywords: Multifractal volatility model; MF-DFA; MCS test; Forecast performance (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:427:y:2015:i:c:p:50-61

DOI: 10.1016/j.physa.2015.02.054

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